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By Oliver Bertin
The Globe And Mail
Report on Business
Friday, March 12, 2004
North American indexes plunge for fourth day, erase hopes that selloff losing steam.
A series of deadly bombings in Spain sent North American stock markets reeling yesterday, as renewed terrorism fears sent major indexes plunging to their fourth successive loss and erased hopes that this week's market selloff was losing steam.
Adrian Mastracci, investment counsel at Vancouver based ‘fee-only’ KCM Wealth Management, says, “Investors fear that sort of thing. Terrorists can strike anywhere, any time.”
In initial reports that rocked the markets in the afternoon, the al-Qaeda terrorist network purportedly claimed responsibility for bombs that killed at least 192 people in Madrid yesterday, said it was behind the bombing of a Masonic Lodge in Istanbul two days earlier and threatened to attack U.S. targets in Yemen.
The unconfirmed reports linking al-Qaeda to the attacks sent stocks in New York and Toronto tumbling, reversing their recovery from opening-bell losses on initial reaction to the Madrid bombings. The blue-chip Dow Jones industrial average lost 160 points between 2:30 p.m. EST and the closing bell.
"Investors fear that sort of thing," said Adrian Mastracci, an investment counsellor with KCM Wealth Management Inc. in Vancouver. "Terrorists can strike anywhere, any time."
By the end of the day, the Dow had sunk 168.51 points or 1.64 per cent to 10,128.38, the worst one-day decline for the average since May, 2003. Toronto's S&P/TSX composite index fell 81.54 points or 0.95 per cent to 8,503.88.
The Nasdaq Stock Market composite index finished down 20.26 points or 1.03 per cent to 1,943.89. The broadly based S&P 500-stock index also fell, dropping 17.11 points or 1.52 per cent to 1,106.78.
Yesterday's declines extended the losing streak for stocks to four sessions, which analysts say was triggered by last Friday's shockingly weak U.S. employment report. The Dow has lost 4.3 per cent over the past week, and in the past two sessions has posted its worst two-day fall in more than 13 months. With the S&P 500's decline, all of the major U.S. indexes have now given back all their gains for 2004. The TSX remains up 3.4 per cent for the year to date, but has shed 3 per cent in the past week.
The TSX Venture Exchange composite index tumbled 26.51 points or 1.4 per cent to 1,869.44.
A promising speech by U.S. Federal Reserve Board chairman Alan Greenspan on U.S. employment prospects, together with good news on the high-technology side helped revive markets from their morning losses in the early afternoon, putting the U.S. indexes briefly into the black. But the al-Qaeda reports wiped out any short-lived optimism in the market.
They also knocked the U.S. dollar for a loop, sending the euro up to $1.2319 (U.S.) from $1.2241 on Wednesday. The Canadian dollar rose 0.20 cents to 75.77 cents. Gold climbed 70 cents in New York to close at $400.70 an ounce.
Analysts believe the markets have begun a healthy and much-needed correction after a one-year bull run, and suggested that the correction still has some distance to go before the upside returns.
"A 5- to 7-per-cent correction is healthy and overdue," said George Vasic, chief strategist at UBS Securities Canada Inc. "I remain optimistic about the prospects for the market," he said, adding that "the markets will be higher in six months, or three."
The Dow has risen 40 per cent since March 12, 2003, just before the war in Iraq, while the Nasdaq has risen 58 per cent and the S&P 500 43 per cent. The S&P/TSX composite is up 37 per cent over that period.
"The correction is not over by any stretch of the imagination," said Elvis Picardo, chief market strategist for Global Securities Corp. in Vancouver. "This correction has been a long time coming."
Mr. Picardo agreed that the "disastrous" employment report last Friday triggered the correction, in a market that had little other news to mull. He said markets could revive next month, provided the employment reports and first-quarter corporate profit numbers bring a fresh batch of good news.
The TSX did have some good news yesterday, as metal stocks bounced back on good copper prices after days in the dumps. But the market was also hurt by Nortel Networks Corp., which slumped 7.4 per cent after the telecom equipment maker said it may have to restate its 2003 results.
Tech stocks got a boost in the early afternoon when National Semiconductor Corp., a major chip maker, reported a healthy profit with plenty of sales in the offing. The company shares initially rose more than 6 per cent after the announcement, carrying Intel Corp., Cisco Systems Inc. and Microsoft Corp. up with it.
The economic news was mixed yesterday. U.S. retail sales rose by a healthy 0.6 per cent in February, led by a 2.7-per-cent jump in automobile sales. But market watchers were disappointed that sales of the non-auto goods were flat.
There was some good news on the employment side, though, as U.S. unemployment claims last week fell to a better-than-expected 341,000.
Mr. Greenspan also gave a small boost to the markets when he repeated that he expects U.S. jobs to pick up soon. "In all likelihood, employment will begin to increase more quickly before long as output continues to expand," he said.
In Canada, capacity utilization rose to a higher-than-expected 82.9 per cent in the fourth quarter from 81.3 per cent in the previous quarter, when Ontario suffered a blackout.
New York odd lots
Odd-lot trades made Wednesday The New York Stock Exchange:
Customer purchases 10,601,929 Short sales 1,378,176
Other sales 13,658,238 Total sales 15,036,414
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